What are the key trends to look for if we want to find a stock with the potential to grow over time? We would like to see more capital being invested in the company and that the returns on capital are increasing. If you see this, it usually means that the company has a solid business model and many profitable reinvestment options. The ROCE of My Food Bag Group (NZSE:MFB) looks great, so lets see what the trend can tell us.
What is Return on Capital Employed?
ROCE stands for Return on Capital Employed. It measures the pre-tax profit a company can make from capital invested in its business. This formula is how to calculate ROCE for My Food Bag Group.
Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets – Current Liabilities)
0.30 = NZ$24m ÷ (NZ$106m – NZ$26m) Based on the trailing 12 months up to September 2022.
So, My Food Bag Group offers a ROCE of 30 percent It’s a remarkable return that outpaces the 21% average earned by similar companies.
Below you can see the ROCE for My Food Bag Group compared to its previous returns on capital. However, you can only tell so much from the past. You can check our Forecasts page to see what analysts have in store for the future. No cost report for My Food Bag Group.
So, How is My Food Bag Group’s ROCE Trending
My Food Bag Group’s ROCE growth rate is remarkable. In particular, the ROCE has grown by 141%, despite the fact that capital utilization has remained relatively constant over the last four year. The company generates higher returns for the same capital. This is an indication that efficiency improvements are occurring. It is worth digging deeper to understand this because although it is great that the company is more efficient, it may also suggest that areas that can be invested internally for organic growth are not being explored.
We are pleased to report that My Food Bag Group was able to improve efficiency and earn higher rates on the same capital. If the valuation and other metrics are appealing, this stock could be a good investment. The stock has fallen 59% over the past year. This stock is worth further consideration because of its promising trends.
Because every company is exposed to some risk, it pays to be aware of them. Here are our top picks 3 warning signs for My Food Bag Group 2 of these are very concerning! You should be aware of.
This article will help you find more stocks that are earning high returns. No cost list of stocks with solid balance sheets that are also earning high returns on equity.
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This article is by Simply Wall St. It is general in nature. We only provide commentary on historical data and analyst projections. Our articles are not meant to be considered financial advice. It is not a recommendation not to buy or sell any stocks and does not take into account your financial goals. Our aim is to give you long-term, focused analysis that is based on fundamental data. Our analysis may not take into account the most recent price-sensitive company announcements and qualitative material. Simply Wall St holds no position in any of the stocks mentioned.
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